Rosenberg & Estis, 50 Years Into CRE Law, Offers Some Wise Counsel

Gary Rosenberg always wanted to be a lawyer, moved to the calling by Scopes trial defense attorney Clarence Darrow. He wasted no time: The day Rosenberg was admitted to the New York bar in 1975 is the day he started his own law firm, as he tells it. It wasn’t until July 1979 that Warren Estis joined, bringing with him the fierce skill at litigation that’s become a tentpole of the business, as well as the surname that makes up half of the Rosenberg & Estis moniker.

While these days the firm focuses primarily on commercial transactional and litigation work, it started with a focus on residential real estate, repping building owners and landlords in rent control and stabilization — work it still does today. Now marking its 50th year, Rosenberg & Estis is one of New York’s pre-eminent full-service law firms specializing in all facets of real estate. 

It’s a hard-won distinction that’s required Rosenberg & Estis to be flexible with the times, understanding the needs of its clients over the past half a century as New York real estate at large shifted from an asset to a commodity. It has also required the firm to bob and weave with the assaulting lows and dazzling highs of the city’s market cycles. Rosenberg & Estis’ trajectory, from two-
person shop to a 95-attorney powerhouse with nearly 80 employees in support roles, largely reflects these changing dynamics of real estate law in New York.

When the firm started, real estate was a much more insular business. Corporations, family owners and insurance companies dominated the city’s commercial deeds. 

Outside of that, “it wasn’t a vibrant business of buying, selling, trading on real estate in the way in which you had in financial markets, but we’ve seen this incredible change in who is involved and how real estate ownership has evolved,” said Michael Lefkowitz, managing member of Rosenberg & Estis, speaking on a video call from the firm’s Midtown East office in mid-February. Lefkowitz stepped into a leading role at the firm in 2020, two years before Warren Estis’s death. “We saw the proliferation of REITs and private equity firms where real estate has become much more of a commodity than it ever was before.”

At the time of Rosenberg & Estis’ founding, larger firms across the city had no interest in peddling in the business of family owners, the types of folks who had fewer than 10 buildings under ownership, said Gary Rosenberg, now chairman of the board at Rosenberg & Estis, speaking on the same video call.

Real estate law “was just above divorce work and personal injury work” in terms of favorability, said Rosenberg (no relation to this reporter). It allowed the small firm to get a foothold in this corner of law, and ascend the ranks to sit opposite larger multi-
disciplinary firms that are now its competitors in the space. These include Fried, Frank, Harris, Shriver & Jacobson; Clifford Chance; Morrison Foerster; Greenberg Traurig; Herrick Feinstein; Morrison Cohen; Akerman; Holland & Knight; Kucker Marino Winiarsky & Bittens; and Adler & Stachenfeld.

“There’s very few who have the breadth of our experience across the board,” Rosenberg said. “We can do a $2 billion financing and we could do a $10 million financing. … There are many large firms [whose] fee structure is such that they can’t compete on lesser deals, and many other firms don’t have the breadth of experience to do complicated deals. Very few of them can do both economically.”

Robert Rothschild of InterVest Capital Partners has worked with the firm for upward of a decade on everything from acquiring performing and nonperforming loans to originating mezzanine credit and preferred equity investments to developments and re-
developments of multifamily and mixed-use properties.

It’s not just the skills set the law firm brings, Rothschild said. “They keep a lean team. And we appreciate it from the billing side.”

Becoming dealmakers 

A few larger projects and decisions have helped boost the firm in its ranks. 

One was the development of the Durst Organization’s 151 West 42nd Street (née 4 Times Square). In the early 1990s, the Durst Organization was renovating its building at 1133 Avenue of the Americas to remove a fireproof asbestos spray that was popular when the building was constructed in 1970. In that project, which required them to vacate and re-rent the building, the developer saw an opportunity to create new, needed office space with large floor plates for large companies leaving buildings with the same asbestos spray. They turned their eyes to the then-blighted Times Square. 

Rosenberg & Estis had, at the time, been contesting plans by Park Tower Realty and Prudential to redevelop much of the Times Square area on behalf of Durst, which was challenging the public purpose of a privately funded real estate development. When litigation was complete, Durst approached Park Tower Realty and Prudential with an offer to purchase the future site of 151 West 42nd Street. Rosenberg & Estis managed the assemblage, acquisition and financing for the construction of the 48-story, 1.6 million-square-foot property on Broadway between 42nd and 43rd streets. The tower helped kick-start the redevelopment of Times Square into what it is today. The financing, too, represented the largest-ever construction loan — $420 million — in New York City to that point. 

Although the firm was not yet known for transactional law, Douglas Durst, chairman of the Durst Organization, said it was easy to make the jump with Rosenberg & Estis.

“We saw how good they were at dealmaking,” Durst said. “Remember, we had just finished suing Prudential. In order to get a deal with them, we had to have a very clever attorney, which Gary is.”

The law firm and the Durst Organization also worked together on the complex process of assembling, clearing and rebuilding the site of what is now One Bryant Park at 42nd Street and Sixth Avenue. The plan to develop the site, which had been in the works since the 1980s, was in peril after the Sept. 11 attacks, an event that challenged New York City’s position as the world’s financial capital and caused banks to consider whether to relocate. 

Bank of America nevertheless wanted to move forward with establishing its global headquarters at the Bryant Park site. It wanted to occupy half of the 50-story tower, but also sought to be an equity owner of the building, Durst said. He credits Rosenberg with coming up with a complicated rent solution at the beginning of the deal, which allowed definitive binding documents to be executed before the building was designed. This secured Bank of America’s commitment, which in turn ensured the assistance at the site of the Empire State Development Corporation and the New York City Economic Development Corporation.

The law firm also led the creation of the first commercial mortgage-backed security that combined tax-exempt Liberty Bonds from the city and state with taxable financing for a $1.3 billion loan for One Bryant Park.

Over the course of 50 years, the firm’s litigators also secured major victories for owners and developers in various levels of the state courts. 

In 2008’s Pultz v. Economakis, Rosenberg & Estis secured a Court of Appeals precedent-
setting ruling that the state’s rent-stabilization law did not limit the number of apartments a landlord can recover for its own use. (In this particular case, that meant vacating an entire building so as to convert it into a single-family home.) The firm also worked successfully on the closely watched 2018 Court of Appeals case Altman v. 285 West Fourth LLC, which prevented the re-entry into rent stabilization of tens of thousands of city apartments deregulated between 1997 and 2011 upon tenants vacating. It also helped establish how high landlords could raise rents on vacated stabilized apartments and what the rent threshold for such units would be.

The perils ahead

Rosenberg & Estis has grown its offerings in the same way it has grown the size of its practice: with consideration to its clients’ immediate needs.

“We realize how cyclical New York is, and so our rule has always been that you survive the bad times and you succeed in the good times,” Rosenberg said. “We’ve always been careful to only expand as our clients needed us. We didn’t go out and hire people because we projected an increase. We hired them when we had an increase.”

To that end, the firm has recently launched two new groups that speak to the city’s current real estate landscape. The Distressed Real Estate Group was announced in October with the aim of helping clients navigate this inflationary environment, where money costs more and is harder to come by. The attorneys said many of their owner clients who took on debt at much lower interest rates don’t have the income stream from their multifamily and office properties to properly service it. That was fine for a while. 

“Through this round, during the last year or two, the banks have been kicking the can down the road — the road is ending,” Rosenberg said. Both Rosenberg and Lefkowitz expect foreclosures, workouts, restructuring of loans, and rightsizing of debt based on current values to be a big part of the firm’s work and big themes in the real estate industry.

The firm also launched its New York City Development Group in early December, when the City Council approved the sweeping City of Yes rezoning plan intended to pave the way for 80,000 new units of housing.

On the residential side, state and city lawmakers have consistently changed laws to benefit tenants at the expense of owners over the last 50 years, Rosenberg said, and today is no exception. The wage requirements under 485x, the city’s real estate tax incentive adopted in March, is particularly vexing to clients, Rosenberg said. It requires developers taking advantage of the incentive on eligible sites with 100 or more units to pay construction workers at least $40 per hour with a 2.5 percent annual increase. The required wage can go much higher, depending on the location of the site and the size of the development. The math doesn’t add up for most developers, Rosenberg said. Indeed, there has been a mini-wave of development proposals with just under 100 units. 

“Believe it or not, the legislature is not smarter than the developers, and they’re not going to trick people into losing money,” Rosenberg said. “They seem to think that if you’re a developer, you have to build. Well — surprise, surprise — most of them are not willing to build and lose money.”

As a result, the firm is seeing sites around the city sit mothballed where it would normally be working on construction loans. It all throws New York’s future into question, particularly as real estate and the sectors that touch it, from construction to law, now constitute one of the largest industries.

“It provides New York with the taxes that make New York work,” Rosenberg said. “While the real estate can’t move, the money can, and you do have to be careful about not having all the money leave.”

But, just as global banks considered ditching town after Sept. 11, only to stay for the city’s wholesale rebirth and pre-pandemic peaks, there is some amount of blind faith that New York City will always pull through.

“There’s going to be a continued need for attorneys to work in this industry and to continue to push for what developers, landlords, our client base, is going to need,” Lefkowitz said. “I really am optimistic about New York City and our ability to continue to have real estate be a thriving part of the essence and fabric of New York.”